THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.
Warrant to Purchase Shares
of Common Stock
Dated as of April 14, 1997
WARRANT
TO PURCHASE COMMON STOCK OF
TELESPECTRUM WORLDWIDE INC.
THIS CERTIFIES that SOMAR, Inc. (the "Holder") is entitled to purchase from
TeleSpectrum Worldwide Inc. (the "Company"), a corporation organized and
existing under the laws of Delaware, at any time, and from time to time, after
the date hereof and until 5:00 P.M. (Eastern Time) on the tenth anniversary
hereof, up to 1,500,000 shares (the "Warrant Shares") of the Company's common
stock, $.01 par value per share (the "Common Stock"), subject to adjustment as
provided herein, at a purchase price of $12.25 per share (the "Warrant Price").
1. Definitions. As used in this Warrant, the following terms have the
-----------
respective meanings set forth below:
"Appraised Value" means, in respect of any share of Common Stock on any
date herein specified, the value attributable to such share of Common Stock if
all of the assets of the Company and its subsidiaries were sold for the
appraised value thereof as of the last day of a fiscal month to end within 60
days prior to such date specified, and thereafter liquidated in accordance with
the terms of the Company's Certificate of Incorporation, as determined in good
faith by the Board of Directors of the Company.
"Book Value" means, in respect of any share of Common Stock on any date
herein specified, the value attributable to such share of Common Stock if all of
the assets of the Company and its subsidiaries were sold for the consolidated
book value thereof as of the last day of any month immediately preceding such
date, and thereafter liquidated in accordance with the Company's Certificate of
Incorporation, as determined in accordance with generally accepted accounting
principles in the United States.
"Business Day" means any day that is not a Saturday or Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
"Current Market Price" means, in respect of the Common Stock on any date
herein specified, the higher of (a) the Book Value per share of Common Stock at
such date and (b) the Appraised Value per share of Common Stock as at such date,
or if there shall then be a public market for the Stock, the higher of (x) the
amount set forth in clause (a) above and (y) the average of the daily market
prices for 30 consecutive Business Days commencing 45 days before such date.
The daily market price for each such Business Day shall be (i) the last sale
price on such date on the principal stock exchange on which the Common Stock is
then listed or admitted to trading, (ii) if no sale takes place on such day on
any such exchange, the average of the last reported closing bid and asked prices
on such day as officially quoted on any such exchange, (iii) if the Common Stock
is not then listed or admitted to trading on any stock exchange, the average of
the last reported closing bid and asked prices on such day in the over-the-
counter market, as furnished by the National Association of Securities Dealers
Automatic Quotation System or the national Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc. ("NASD") selected by the Company.
"EPS" means the fully-diluted earnings per share of the Company in its
fiscal year ending December 31, 1997, as calculated in accordance with generally
accepted accounting principles by the Company's independent public accountant
and as reported in the Company's Form 10-K for such year.
"Expiration Date" means the date which is the tenth anniversary of the date
of this Warrant.
"Outstanding" means, when used with reference to Common Stock or any class
thereof, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock or of the relevant class, except
shares then owned or held by or for the account of the Company or any subsidiary
thereof, and shall include all shares issuable in respect of outstanding scrip
or any certificates representing fractional interests in shares of Common Stock
or of the relevant class.
"Vested Warrant Shares" means the Additonal Warrant Shares and the Initial
Warrant Shares.
2. Exercise of Warrant. Subject to Section 5 hereof, this Warrant shall
-------------------
be exercisable at any time, and from time to time, after the Closing Date until
the expiration of the Warrant as provided in Section 3 hereof, in the manner set
forth in Section 4 hereof.
3. Expiration of Warrant. This Warrant, to the extent not exercised,
---------------------
shall expire and cease to be of force and effect at 5:00 P.M. (Eastern Time) on
the Expiration Date.
4. Method of Exercise. Subject to the vesting provisions of Section 5
------------------
hereof, this Warrant may be exercised in whole or in part (but not as to
fractional shares) by the surrender of the Warrant, with the Purchase Agreement
2
attached hereto as ANNEX A, properly completed and duly executed, at the
principal office of the Company at 000 X. Xxxxx Xxxx, Xxxx xx Xxxxxxx,
Xxxxxxxxxxxx 00000, or such other location which at that time shall be the
principal office of the Company (the "Principal Office"), and upon payment to it
of the Warrant Price for each Vested Warrant Share to be purchased upon such
exercise (the aggregate of the Warrant Price for all shares to be exercised
being referred to herein as the "Purchase Price"). The Purchase Price shall be
paid by delivering either: (i) a certified check, bank draft or wire transfer of
immediately available funds to the order of the Company or (ii) this Warrant
with instructions that such number of Vested Warrant Shares be retained by the
Company as payment of the Purchase Price (a "Cashless Exercise"). In the event
of a Cashless Exercise, the Holder shall receive that number of Vested Warrant
Shares determined by multiplying the number of Vested Warrant Shares for which
the Cashless Exercise is made by a fraction, the numerator of which shall be the
difference between the then Current Market Price per Vested Warrant Share and
the Warrant Price, and the denominator of which shall be the then Current Market
Price per share of Common Stock. The remaining Vested Warrant Shares for which
Cashless Exercise has been made shall be deemed to have been paid to the Company
as the Purchase Price. The Holder shall be treated for all purposes as the
holder of the Vested Warrant Shares as of the close of business on the date of
exercise, and certificates for the Vested Warrant Shares so purchased shall be
delivered to the person so entitled, properly endorsed for transfer or
accompanied by appropriate stock powers, within a reasonable time, not exceeding
five days, after such exercise. Unless this Warrant shall have expired, a new
Warrant of like tenor and for such number of Vested Warrant Shares as the Holder
shall direct, representing in the aggregate the right to purchase that number of
Vested Warrant Shares with respect to which this Warrant shall not have been
exercised, shall also be issued to the Holder within such time.
3
5. Vesting Schedule. Effective as of the date hereof, 500,000 of the
----------------
Warrant Shares (the "Initial Warrant Shares") shall vest immediately. The
number of the remaining Warrant Shares, if any, which shall become vested (the
"Additional Warrant Shares") shall be based on the Company's EPS in accordance
with the following schedule (and shall vest, if at all, on the first day
following the issuance of the audit report on the Company's financial statements
for the year ending December 31, 1997):
Cumulative Additional
Warrant Shares Vested EPS
----------------------- ---------------
0 Less than $0.64
50,000 $0.64
100,000 $0.65
150,000 $0.66
200,000 $0.67
250,000 $0.68
300,000 $0.69
350,000 $0.70
400,000 $0.71
450,000 $0.72
500,000 $0.73
550,000 $0.74
600,000 $0.75
650,000 $0.76
700,000 $0.77
750,000 $0.78
800,000 $0.79
850,000 $0.80
900,000 $0.81
950,000 $0.82
1,000,000 $0.83
This Warrant shall not be exercisable for any Warrant Shares which are not
also Vested Warrant Shares.
6. Certain Covenants.
-----------------
(a) The Company shall cause all Vested Warrant Shares to be listed on
each national securities exchange or securities quotation system, if any, on
which the other outstanding shares of Common Stock of the Company are then
listed or quoted.
(b) The Company shall (i) use its best efforts to comply with the
current public information requirements of Rule 144 ("Rule 144") under the 1933
4
Act and (ii) at all times Rule 144 is available for use by Xxxxxx, furnish the
Holder upon request with all information within the possession of the Company
required for the preparation and filing of Rule 144.
7. Adjustment of Purchase Price and Number of Shares. The number of
-------------------------------------------------
Vested Warrant Shares purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain events as
follows:
7.1 Stock Dividends, Subdivisions or Combinations. If the Company at
---------------------------------------------
any time while the Warrant remains outstanding and unexpired shall:
(a) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock,
(b) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or
(c) pay a dividend or make a distribution in shares of its Common
Stock,
then the number of shares of Common Stock purchasable upon the exercise of
this Warrant immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock that a record holder
of the same number of shares of Common Stock represented by this Warrant
immediately prior to the occurrence of such event would own or be entitled
to receive after the happening of such event and the Warrant Price shall be
proportionately reduced. Furthermore, if any of the foregoing events shall
occur during 1997, then the EPS targets set forth in Section 5 shall be
proportionately adjusted.
7.2 Certain Other Distributions. If at any time the Company shall
---------------------------
take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out
of earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the
Company),
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash).
then the number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted to equal the product of the number of shares of
5
Common Stock issuable upon exercise of this Warrant immediately prior to
such adjustment by a fraction (i) the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such
record and (ii) the denominator of which shall be such Current Market Price
per share of Common Stock minus the amount allocable to one share of Common
Stock of any such cash so distributable and of the fair value (as
determined in good faith by the Board of Directors of the Company) of any
and all such evidences of indebtedness, shares of stock, other securities
or property or warrants or other subscription or purchase rights so
distributable. A reclassification of the Common Stock (other than a change
in par value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of
this Section 7.2 and, if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a part
of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 7.1.
7.3 Reclassification, Consolidation or Merger. At any time while
-----------------------------------------
this Warrant remains outstanding and unexpired, in case of any
reclassification or change of outstanding securities issuable upon exercise
of this Warrant (other than a change in par value, or from par value to no
par value, or from no par value to par value or as a result of an event
described in Sections 7.1(A) or (B) above) or in case of any consolidation
or merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change,
other than a change in par value, or from par value to no par value, or
from no par value to par value), or in the case of any sale or transfer to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company shall, without payment of any
additional consideration therefor, execute a new Warrant providing that the
Holder shall have the right to exercise such new Warrant (upon terms not
less favorable to the Holder than those then applicable to this Warrant)
and to receive upon such exercise, in lieu of each share of Common Stock of
the Company theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, sale
or transfer by the Holder of one share of Common Stock issuable upon
exercise of this Warrant had this Warrant been exercised immediately prior
to such reclassification, change, consolidation, merger, sale or transfer.
Such new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 7. The provisions of this Section 7.3 shall similarly apply to
successive reclassification, changes, consolidations, mergers, sales and
transfers. Furthermore, if any of the foregoing events shall occur during
1997, then the EPS targets set forth in Section 5 shall be proportionately
adjusted.
7.4 Liquidating Dividends, Etc. If the Company at any time while
---------------------------
this Warrant remains outstanding and unexpired makes a distribution of its
assets to the holders of its Common Stock as a dividend in liquidation or
6
by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or
any distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the
circumstances otherwise provided for in this Section 7), the holder of this
Warrant shall be entitled to receive upon the exercise hereof, in addition
to the shares of Common Stock receivable upon such exercise, and without
payment of any consideration other than the Warrant Price, an amount in
cash equal to the value of such distribution per share of Common Stock
multiplied by the number of shares of Common Stock which, on the record
date for such distribution, are issuable upon exercise of this Warrant
(with no further adjustment being made following any event which causes a
subsequent adjustment in the number of shares of Common Stock issuable upon
the exercise hereof), and an appropriate provision therefor should be made
a part of any such distribution. The value of a distribution which is paid
in other than cash shall be determined in good faith by the Company's Board
of Directors.
7.5 Other Action Affecting Common Stock. If after the date hereof
-----------------------------------
the Company shall take any action affecting the outstanding number of
shares of Common Stock, other than an action described in any of the
foregoing subsections of Section 7 hereof, inclusive, that would have a
materially adverse effect upon the rights of the Holder, the Warrant Shares
and the Warrant Price shall be adjusted in such manner and at such time as
the Company's Board of Directors on the advice of the the Company's
independent public accountants may in good faith determine to be equitable
in the circumstances.
7.6 Other Provisions Applicable to Adjustment under this Section.
------------------------------------------------------------
The following provisions shall be applicable to the making of adjustment of
the number of shares of Common Stock issuable upon exercise of this Warrant
provided for in this Section 7:
(a) When Adjustments to Be Made. The adjustments required by
---------------------------
this Section 7 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock issuable upon exercise of the
Warrant that would otherwise be required may be postponed (except in
the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 7.1) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock issuable upon exercise of the Warrant
immediately prior to the making of such adjustment. Any adjustment
representing a change less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as
soon as such adjustment, together with other adjustments required by
this Section 7 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
7
(b) Fractional Interest. In computing adjustments under this
-------------------
Section 7, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a
----------------------------
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(d) Escrow of Warrant Stock. If after any property becomes
-----------------------
distributable pursuant to this Section 7 by reason of the taking of
any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, and the Holder exercises
this Warrant, any additional shares of Common Stock obtainable upon
exercise by reason of such adjustment shall be deemed the last shares
of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other
property shall be held in escrow for the Holder by the Company to be
transferred to the Holder upon and to the extent that the event
actually takes place, upon payment of the Warrant Price.
Notwithstanding any other provision to the contrary herein, if the
event for which such record was taken fails to occurred or is
rescinded, then such escrowed shares shall be cancelled by the Company
and escrowed property returned.
8. Legend. Each certificate for shares obtained upon exercise of this
------
Warrant shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"). Such
securities have been acquired for investment and may not be sold or
transferred in the absence of an effective registration statement for
such securities under the 1933 Act, unless, in the opinion (which
shall be in form and substance satisfactory to the Corporation) of
counsel satisfactory to the Corporation, such registration is not
required."
In addition, the certificate shall bear such additional legend with respect to
state securities or blue sky laws as reasonably determined by counsel to the
Company.
9. Notice of Adjustments. Whenever the number of shares of Common Stock
---------------------
issuable upon exercise of this Warrant shall be adjusted pursuant to Section 7
hereof, the Company shall promptly notify the Holder in writing of such
adjustment, setting forth in reasonable detail the event requiring the
8
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Company's
Board of Directors made any determination hereunder), and the number of shares
of Common Stock obtainable upon exercise of this Warrant after giving effect to
such adjustment. Such notice shall be mailed (by first class and postage
prepaid) to the Holder.
10. Fractional Shares. No fractional shares of the Company's Common Stock
-----------------
will be issued in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor equal in amount
to the product of the applicable fraction multiplied by the Warrant Price paid
by the Holder for its Vested Warrant Shares upon such exercise.
11. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Holder as follows:
(a) This Warrant has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed by a duly
authorized officer of the Company and constitutes a valid and binding obligation
of the Company.
(b) Neither the execution and delivery of this Warrant, nor the
consummation of the transactions contemplated hereby, will violate or result in
any violation of or be in conflict with or constitute a default under any term
of the charter or bylaws of the Company or of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Company.
(c) Upon exercise of this Warrant and payment of the Warrant Price by
the Holder, the Vested Warrant Shares will be duly issued, fully paid and
nonassessable shares of Common Stock.
12. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company
--------------------------------------
of evidence reasonably satisfactory to it that this Warrant has been mutilated,
destroyed, lost or stolen, and in the case of any destroyed, lost or stolen
Warrant, a bond of indemnity reasonably satisfactory to the Company, or in the
case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
13. Successors and Assigns. This Warrant and the rights evidenced hereby
----------------------
shall inure to the benefit of and be binding upon the successors of the Company
and the Holder.
14. Amendment. This Warrant may be modified with the written consent of
---------
the Company and the Holder.
15. Transferability. This Warrant, and any Vested Warrant Shares issued
---------------
upon exercise of this Warrant, may be sold, pledged or otherwise transferred or
encumbered by the Holder.
9
16. Headings. The descriptive headings of the several sections of this
--------
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.
17. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of Delaware without regard to the provisions thereof relating to conflict
of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer, attested by its duly authorized officer, on the date of
this Warrant.
TELESPECTRUM WORLDWIDE INC.
By: /s/ X. XXXXX X'XXXXX
-------------------------
X. XXXXX X'XXXXX,
CHIEF EXECUTIVE OFFICER
10
